Banks To Endure Government “Stress Tests” – How Safe Is Your Mortgage?

admin — Tue, 03 Mar 2009 18:12:19 +0000

The government is requiring major US banks who are eligible for TARP funds to participate in frequent “stress tests” to show how stale the financial institution is in case of severe economic turmoil The tests will entail many scenarios of which is foreseeable in the near future if the economy continues on the trail it’s on, and show how well the bank will be able to perform in such an environment. Some aspects of the test include a scenario if:

Unemployment were to rise to 10.3%

Housing prices drop another 22%

Overall economic growth drops to -3.3%

The result of these tests will show how banks will respond to such conditions and, most importantly, what will be the outcome of the bank’s balance sheet. Hopefully, by doing so, the government will have a better understanding of how much more money banks will really need to get through the tougher times. It will also help in the transparency of these institutions to hopefully bring back some confidence in the financial sector.

It is important to know of the security of your lending institution and the security of your mortgage. We are in tumultuous times and by trying to foresee problems that lie ahead can put you in a strong advantage when dealing with your mortgage. Loan modification could be in your near future and it is in your best interest to know as much about the options you have in front of you with dealing with your loan. Talk to a loan modification or refinance specialist today!

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Banks To Endure Government “Stress Tests” – How Safe Is Your Mortgage?